Financial Forces Threaten Improved Auto Supply Chain
Inflation and interest rate hikes could dampen consumer demand.
Many prospective buyers may wait out increased prices.
IMAGE: Getty Images/Photobuay
As car manufacturing supply chains start to stabilize after more than two and half years of disruption, financial market forces threaten their own havoc.
Inflation and interest rate hikes meant to ease it are leading to higher auto financing costs that could dissuade many prospective buyers from replacing their vehicles.
The new pressures come just as inventories are primed for replenishing as supply chains start to flow more freely.
The Federal Reserve has indicated it plans to continue interest rate increases into next year in order to weaken inflation, which is at its highest level in four decades. It’s targeting a 2% inflation rate. Rate increases tend to slow demand for homes, cars and other goods bought on credit.
The Fed is also counting on continued easing of supply chains to better meet demand and thereby cool price growth.
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